Essay about Negotiable Instrument and P.

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Homework Exercise (HE) 6 (Part 4 - Chapters 15-17)
After each question type your answer followed by citing the page(s) in the text that support your answer. Use additional pages as needed. Each question, 1 – 5 is worth 2 pts.

1. What is a negotiable instrument? List and describe the types of negotiable instruments -
A negotiable instrument is a substitute for cash. It is also a written document containing the signature of the creator who makes an unconditional promise (Chapter 15, p. 291).
Here are some types of negotiable instruments:
a. Note – a promise by the maker of the note to pay the payee of the note (Chapter 15, p. 292).
b. Draft – a instrument validating an order by a drawer to a drawee to pay a payee (Chapter 15, p. 292).
c. Demand Instrument – allows the payee to demand payment (Chapter 15, p. 292).
d. Time instrument – allows payee to collect payment only at a specified time (Chapter 15, p. 292).
e. Certificate of deposit – document whereby a bank promises to pay a payee a certain amount at a certain time (Chapter 15, p. 292).
f. Check – orders a bank to pay a specified sum of money to the payee from the drawer’ account (Chapter 15, p. 292).
a. Cashiers
b. Travelers
c. Certified
2. List the requirements for negotiability? Describe the “negotiation” of –
The six requirements are (Chapter 15, pp. 293-294):
1) Instrument is written
2) Signed by the creator
3) Instrument has an unconditional promise
4) Amount to be paid is a certain amount
5) Payment is either on demand or at a fixed date
6) Must contain the words of negotiability “to the order of” or words indicating that it is a bearer instrument
a. Order instruments – Requires delivery and an endorsement (Chapter 15, p. 298).
b. Bearer instruments – Requires only the delivery of the instrument to the holder by the payee (Chapter 15, p. 298).
3. List and describe the ways in which a negotiable instrument may be discharged –
i. Discharge through payment and tender of payment - all parties are discharged if full amount due is payed in full (Chapter 16, p. 335). ii. Discharge by cancellation or renunciation – cancelling an instrument discharges the obligation of a party who must pay the instrument. Renunciation occurs when a party agrees, in writing, not to sue the obliged party (Chapter 16, p. 336). iii. Discharge by reacquisition – occurs when a former holder of an instrument has the instrument transferred back to him or her by negotiation (Chapter 16, p. 336). iv. Discharge by impairment of recourse- the ability of a party to seek reimbursement (Chapter 16, p. 337).
v. Discharge by impairment of collateral – if a party posts collateral to ensure his performance of the instrument and the holder of the collateral impairs the value of the collateral (Chapter
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